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Estonian Rural Development Strategy 2007–2013
Ministry of Agriculture of the Republic of Estonia
2010
Contents
Contents
Introduction......
1. Assessment of the present economic, social and environmental situation and basic indicators
1.1. General situation
1.1.1.Economic structure
1.1.2.Employment
1.1.3.Unemployment
1.1.4. Population
1.2. Economic situation/competitiveness of agriculture, agricultural produce processing industry and forestry
1.2.1. Agricultural production
1.2.2. Agricultural produce processing industry
1.2.3. Land improvement
1.2.4.Research, education, advice
1.2.5.Forest management
1.3. Agricultural environment and landscapes
1.3.1. Land use
1.3.2.Biological (incl. genetic) and landscape diversity and rural cultural heritage
1.3.3.Water
1.3.4. Soil
1.3.5. Climate change and renewable energy
1.4. Rural enterprise and quality of life
1.4.1. Rural enterprise
1.4.2.Quality of life
1.4.3.Rural natural and cultural heritage
1.5. Local initiative
2. Overall strategy. Connection of the Community strategic aims with national strategy
2.1. Bases for the Strategy
2.2. Rural Development Plan 2007–2013 target group
2.3. General balance between the axes, the EU and national priorities, the indicative breakdown of resources
2.4. Contribution to the attainment of the Lisbon objectives and links with the Lisbon Action Plan
2.4.1. Contribution to the attainment of the Lisbon objectives
2.4.2. Relationship with Estonian Action Plan for Growth and Jobs
2.5. Contribution to the attainment of the Gothenburg objectives
3. Strategy by axes, quantified objectives
3.1. Improving the competitiveness of the agricultural and forestry sector
3.2. Maintenance of agri-environment and countryside
3.3. Quality of life in rural areas and diversification of rural economy
3.4. LEADER-axis
3.5. Quantified objectives
3.5.1. General socio-economic development
3.5.2. Competitiveness
3.5.3. Environment
3.5.4. Wider rural development
3.5.5. LEADER
4. Rural development plans and the indicative breakdown of resources
5. Consistency of the Strategy with the Community Strategic Guidelines and complementarity with the other Community financial instruments
5.1. Consistency of the Strategy with the Community Strategic Guidelines and links with the other Community policies
5.1.1. Consistency of the Strategy with the Community Strategic Guidelines
5.1.2. Links of the Strategy with the other Community policies
5.2. Complementarity with CAP and the other Community financial instruments
5.2.1. Complementarity with CAP
5.2.2. Complementarity with the other Community financial instruments
6. Rural network
Introduction
Estonian Rural Development Strategy (RDS) covers the period 2007–2013. In view of the sustainable development of rural areas, RDS concentrates on the Community objectives concerning competitiveness of agriculture and forestry, land management and environment, quality of life and diversification of activities, at the same time taking into account the distinctive nature and diversity of Estonian rural areas. As a member of the European Union, Estonia has the opportunity to participate in the Community rural policy and receive its share of the EU budget foreseen as support for rural development. This document serves as a framework for the preparation of the Estonian Rural Development Plan 2007–2013.
RDS includes the analysis of the economic, social and environmental situation, the overall strategy with the translation of the Community priorities and national priorities, strategy by axes with quantified objectives, the internal and external consistency and complementarity with other Community financial instruments, the set up of the National Rural Network and the indicative budget.
In the preparation of the RDS, Council Regulation (EC) No. 1698/2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD), Council Decision of 20 February 2006 on Community strategic guidelines for rural development (programming period 2007 to 2013) and the Community National Strategy Plan Guidance Template have been taken into account. Rural development policy complements the Common Agricultural Policy (CAP), contributing to the Community objectives and integrating other policy priorities, thereby encouraging the synergy between different sectors. RDS is in conformity with the Community and national priorities and supplements other Community policies. In more detail, the complementarity and consistency of the Strategy with other Community policies is described in Chapter 5.
On the one hand, the general context of the RDS considers the decisions of CAP concerning competitiveness and sustainable development, which through decoupling of support are improving market orientation and by different environmental, food safety and animal welfare requirements increase the self-liability of agricultural producers, contributing to the sustainability of the environment and to consumer’s satisfaction. On the other hand, pressure on CAP development, decrease in support payments and liberalisation of the world agricultural market caused by WTO negotiations is also taken into account.
The preparation and co-ordination of RDS was conducted by the Ministry of Agriculture. By ministerial order No. 240 of 1 September 2005, Steering Committee for the preparation of the Estonian Rural Development Plan 2007–2013 was established. In addition to the Ministry of Agriculture, representatives of the Ministry of Finance, the Ministry of Economic Affairs and Communications, the Ministry of the Interior, the Ministry of the Environment, the Estonian Agricultural Registers and Information Board, the Estonian Chamber of Agriculture and Commerce, the Estonian Agricultural Producers Central Union, the Estonian Chamber of Environmental Associations, the Estonian Farmers’ Federation, the Estonian Private Forest Union, the Non-Profit Association Estonian Young Farmers, the Movement of Estonian Villages and Small Towns, the Estonian University of Life Sciences, the Non-Profit Association Etna in Estonia and the Non-Profit Association of Estonian Small and Medium-Sized Undertakings also belong to the Steering Committee. In the Steering Committee, basic work is done in wider axis-based working groups which involve even higher number of social partners. Overviews of the preparation of the Strategy have been made at the Agricultural and Rural Development Council and in the Rural Affairs Committee of the Parliament of Estonia. The Estonian Rural Development Strategy was co-ordinated with ministries and approved by the Estonian Government. The Strategy will be submitted to the European Commission for information.
1. Assessment of the present economic, social and environmental situation and basic indicators
1.1. General situation
1.1.1.Economic structure
In Estonia, the average economic growth of the last 10 years has been 6,4%. In the EU, only Ireland has been able for more – 7,8%. As at the same time the average economic growth of EU-25 has been approximately 2,3%, in Estonia GDP per person has increased from one third to about the half (50,4%) of the EU average level, considering the purchasing power parity. If the present development will continue, we can reach about 62–63% of the average of the EU by 2010. GDP at constant prices is given in Annex.
More than a half (59% in 2003) of economic growth has taken place in Northern Estonia, followed by Southern Estonia (17,6%). The relative importance of other regions remained between 7,2 and 8,5%. Regional differences in GDP have increased in the last years. Within 1998–2003, the share of Northern Estonia has increased by 2,2% and of Southern Estonia by 0,2%, the importance of other regions has decreased. During this period, GDP per capita has increased 1,7 times on an average, but growth between regions varies – Northern Estonia 1,72, Southern Estonia 1,68, Central Estonia 1,6, Western Estonia and Northeastern Estonia 1,5 times. In Northern Estonia, GDP per capita is 1,5 times higher than the average of Estonia, in Northeastern Estonia it is 59,4% of an average and in other regions 68–70% of an average.
According to preliminary data, in 2005, GDP at current prices was 164,9 billion kroons, and at the constant prices of 2000, GDP was 134,0 billion kroons or 9,8% higher than in 2004.
By fields of activity, in 2005, compared with the previous year, value added at constant prices increased most in financial intermediation (29,2%), hotels and restaurants (20,4%) and in construction (13,6%). Wholesale and retail trade (13,2%) and processing industry (12,1%) followed. In forest management, fishing and agriculture and hunting, value added decreased by 5,3%, 4,5% and 0,2% respectively.
Most of all, processing industry, real estate, leasing and business, transport, storage and communication, wholesale and retail business contributed to the increase in GDP. In all, the share of the value added of those fields of activity in gross value added was 61,9%.
1.1.2.Employment
In 2005, the number of people employed increased by 2,0% or by 11900 persons. In 2005, employment mainly increased in transport, storage, immovables, lease and business, hotels, restaurants, energy and construction. Employment mainly decreased in the sectors of agriculture and processing industry.
As of 2005, employment rate was 64%, which is close to the EU-25 respective figure (63,3%). In 2005, the employment rate of 15–74 years old higher than the Estonian average (57,9%) could only be observed in Northern Estonia (64,3%). Employment rate was the lowest in Northeastern (50,9%) and in Southern Estonia (53,5%).
In rural areas, the number of people employed has decreased from 246 300 in 1989 to 172 800 in 2005 (-29,8%). The share of primary sector (agriculture, hunting, forestry, fishery) in employment has decreased more than three times (55,9–15,3%), compared with 1989, the share of tertiary sector (services) has increased 1,4 and the share of secondary sector (processing industry, mining industry, construction, energy, gas and water supply) has increased 1,2 times. In all, employment in primary sector has decreased by 111 200 people employed, at the same time, increase in employment in secondary sector (10 000 persons) and in tertiary secor (27 600 persons) could only compensate for 33,8% of it.
During the last five years, continual decrease in the share of employment in primary sector (1–2% a year), growth of secondary sector (about 1% a year) and stabilisation of tertiary sector at 50–53% has been observed.
The basic sources to the increase of employment are still processing industry, rural tourism, extension of joint activity and partnership, education and trade but also the sectors of transport and construction.
1.1.3.Unemployment
Due to positive developments at labour market, unemployment rate decreased from 9,7% to 7,9% in 2005. In 2005, unemployment rate decreased from 8,6% to 7,0% in rural area. At the same time, small number of jobs causes problems in rural areas. The highest unemployment rate could be observed in Northeastern Estonia (16,2%) and the lowest in Central (5,1%) and in Western Estonia (5,7%).
In 2005, unemployment rate was higher among people with up to basic education – 14,5%, general secondary education, vocational education and vocational secondary education after basic education – 9,2%, vocational secondary education after general secondary education – 9,0% and among people with higher education and post-graduate training the relevant indicator was 3,9%. The share of labour force of the third educational level was higher than the average of the 4th quarter of 2005 only in Northern Estonia (44,4%). Southern Estonia (31,4%), Northeastern Estonia (28,5%) and Central Estonia (24,7%) followed.
In 2002, 11 900 people (9%) of 15–74 years old inactive rural inhabitants and 5800 people (2%) in cities were discouraged. In 2003 and 2004, the number of discouraged people decreased by 300 and 1500 respectively, making up 7,8% and 7,3% of inactive people. is The growth of the number of discouraged people among rural inhabitants of lower educational level, in particular among men, is one of the biggest problems.
1.1.4. Population
Decrease in the size of Estonian population has been inhibited in the last years. As of 1 January 2001, there were 1367000 inhabitants in Estonia. At the beginning of 2005, the respective figure was 1347000 (decrease about 0,37% a year). The size of rural population has remained relatively stable: 446800 in 1989, 437566 in 1999 and 449700 at the beginning of 2005.
1.2. Economic situation/competitiveness of agriculture, agricultural produce processing industry and forestry
1.2.1. Agricultural production
Agriculture is the branch of economy which has undergone the deepest changes during the transition period. Regardless of the decreased share of agriculture in Estonian economy, its significant role in supplying rural population with food, in rural enterprise and in shaping cultural landscape has survived.
For nine successive years (1994–2002), value added of agriculture and hunting at constant prices decreased by 5% a year on an average. Only in 2003 and 2004, value added in the sectors mentioned started to increase, by 2,0% and 6,2% respectively. Negative real growth of value added in agriculture and hunting has also influenced their share in overall value added. If in 1997, agriculture made up about 3,9% of the value added of GDP, by 2004, it had decreased to 2,4%.
If in 1997, GDP growth per person engaged in agriculture was about 27% lower than in overall economy, in 2002, the growth of value added per person engaged in agriculture was already about 40% lower than in overall economy.
According to the Economic Accounts for Agriculture, in 2004, the value of agricultural production totalled to 7405 million kroons, of which subsidies on product in crop and livestock farming made up 5,3% (395,5 million kroons). Compared with the year 2003, agricultural production (at current prices) increased by 9,6% with subsidies and by 8,0% without subsidies. In 2004, the gross value added of agricultural producers increased by 15,2% and the net value added increased by 21,2%, compared with 2003. First of all, this was caused by the increased volume of subsidies on product and by bigger increase in product selling prices, compared with rise in input prices. Of producer prices, raw milk price advanced most (32,3%). Animal husbandry makes up the biggest part of production value (in 2004, about 58,5%).
According to the data of the structure survey made in 2003, there are about 37 000 agricultural holdings in Estonia. The share of agricultural holdings smaller than 1 European Size Unit (ESU) is relatively big in Estonia (about 62,5% of holdings). If the agricultural holdings who have applied for Single Area Payment for agricultural production or landscape maintenance are regarded as active agricultural holdings, there are about 19 000 applicants for SAPS in Estonia. At the same time, we have to consider that according to the FADN database we only have about 7000 professional commercial enterprises which receive most of their income from agricultural production (bigger than 2 ESU).The joint economic activity of agricultural producers is rather modest. In 2007, there were 67 agricultural commercial associations in Estonia with a total net turnover of 384 million kroons, which made up only 6,5% of the total agricultural net turnover.
Age structure of the Estonian agriculture can be compared with the EU-15 age structure. Sole holders less than 35 years old made up 10% of agricultural operators, holders older than 55 years made up 55% of agricultural operators. Compared with the EU-15 relevant indicators, the proportion of the people 35 years old to the people 55 years old is 0,12 in the EU and 0,19 in Estonia. Therefore, it is necessary to promote the participation of younger generation in agriculture.
1.2.1.1. Competitiveness of agricultural production
To understand the present status of the competitiveness of agricultural production, attention should be given to prolonged problems. In 1990ies, restructuring of agriculture was complicated by the disappearance of the former Soviet markets, rapid appreciation of production inputs and by the liberal trade policy implemented in Estonia. In such unequal competitive conditions, the competitiveness of agriculture as a sector fell and it was not possible to make necessary investments. The buying-in prices for agricultural products also fell and did not enable sufficient accumulation of capital for the modernisation of production and for making it more environment-friendly.
Besides, the need for investment has considerably increased due to bringing agricultural production into accordance with the commitments taken by Estonia in the Accession Treaty to apply the appropriate EU legal acts. After the accession to the EU, due to the increase in direct payments, the self-financing capacity of the investments made by agricultural producers of Estonia as a new Member State has improved but the expenditure level has also increased.
Here, it has to be added that within the new programming period 2007–2013, new standards concerning agricultural producers and requiring additional investments (since 2007, the obligation for stock farmers to use best available techniques (BAT)) are expected. The application of BAT standards has to ensure better compliance with environmental requirements. In Estonia, local BAT instructions considering beside environmental protection also farm staff and animal welfare have been prepared for stock-farming. Technologies preventing the discharge or release of pollution into soil, air or water and enabling better utilization of waste are preferred. The optimal use of energy and water resource is also considered. The stock farmers who will have to meet the BAT requirements, are liable to have an integrated environmental permit providing all the investments necessary to bring stock farmers into conformity with the BAT requirements and laying down the time limits for meeting the requirements.
Besides, at the beginning of the new period, the necessary investments related to the cross-compliance requirements. For example, in the last years of the programming period new requirements concerning poultry and organic animals will enter into force resulting in considerable growth in the need for investments in poultry and organic farming. Attention should also be given to the additional requirements proceeding from the Community action plan 2006–2010 on animal protection and welfare.
From the survey on the need for investments in the sector of agriculture made by the Estonian University of Life Sciences it becomes evident that on the basis of different scenarios the sector of agriculture should invest 19,4–21,8 billion kroons within 2007–2013, of which 5,8–6,5 billion kroons are related to the new requirements while the remaining 13,6–15,3 billion kroons are the consequence of the above mentioned unmade investments of 1990ies, which have to be made up for now year by year. The survey also indicates that according to the Farm Accountancy Data Network (FADN) data bigger agricultural producers are relatively better furnished with usable machinery, equipment and buildings, compared with smaller agricultural producers. Of the fixed assets belonging to small and medium-sized agricultural producers, 64% and 58,6% respectively have completely depreciated. In case of bigger agricultural producers, the respective figure is 41,9%.
Considering big need for investment, much attention should also be given to the self-financing capacity of the investments to be made by agricultural producers. The FADN data are used to analyse the income (by types of production and size groups) received by agricultural producers. The analysis of sustainability based on net value added of agricultural holdings indicated that small agricultural holdings are not sustainable because of insufficient resources for investment and restructuring of production. Even medium-sized enterprises would need substantial restructuring. Their reinforcement and the improvement of their sustainability is extremely important, as regards rural development and competitive sector of agriculture. According to the FADN data, in agricultural holdings of more than 2 ESU, net value added per one labour unit was 58 870 kroons on an average in 2003. In 2004, the respective figure was 113 533 kroons, mainly due to the increase in support payments. At the same time, it is lower than the EU-15 respective figure – 341 925 kroons (in 2003).